Transcript Slide 1

Financial Aid
101
Paying for
Postsecondary
Education
Things to take away…
• Know where the money
comes from and how you
apply for it
• File the FAFSA
• Know your DEADLINES
• Be a Smart Consumer
What is Financial Aid?
Financial aid consists of funds
provided to students and
families to help pay for
postsecondary educational
expenses
Basic Principles
• Joint responsibility of the student and
parent(s) to pay, to the extent possible
• Need-based financial aid subjected to
federal formula to determine financial need
• Not all families qualify for need-based aid.
There is no guarantee that you will get
any free money to pay for higher education
Types of Financial Aid
• Gift Aid – FREE MONEY
Grants and scholarships
• Self Help Aid
Loans and work programs
• Merit-Based Aid based on - academic ability, special talent or
achievement, program of study, family or ethnic background
• Need-based grants, loans, and employment usually based
on - income, assets, other factors
Where does the money come from?
• Federal Government
• State Government
• School/Colleges
• Private Scholarship Sources:
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HS Counselors
Clubs and organizations
Employers
Internet scholarship searches
Financial Aid
101
Federal, State
and College
Financial Aid
Programs
Federal Direct Stafford
Loan Program Borrowing Limits
Additional eligibility
Federal Direct PLUS Loan
• For parents of dependent students or graduate
level students
• There is no borrowing limit on the PLUS Loan
• May borrow up to full cost of education minus
financial aid
• Credit check is required on this loan, but no debtto-income test
• 4% origination fee will be deducted from
disbursements
Federal Direct PLUS Loan
• Repayment begins immediately, but can defer
repayment until 6 months after student graduates or
drops below half-time enrollment.
» If defer payment – encouraged to make interest payments
• All loans must be repaid within 10 years
• PLUS loan
• Interest rate = 7.9%
• $10,000 = $125/mo; $40,000 = 500/mo;
• 2 or 3 kids???
Alternative/Private Education Loans
• Student borrows in his or her own name
• Based on credit scoring and debt-to-income ratio
• Repayment may be deferred until education
completed
• Fees, interest rates, loan amounts, and repayment
provisions vary by lender and are generally higher
than federal student loans
• Co-signers usually required. Some loan products
have a co-signer release option
• Compare loans before making choice and read the
fine print!
Financial Aid
101
College
Fund
FORMS
The Free Application for
Federal Student Aid (FAFSA)
• The FAFSA (Free Application for Federal Student
Aid) is a federal form used to determine student
eligibility for the following:
• Federal programs, such as Pell Grants, workstudy, and student loans
• State programs, such as Pennsylvania State
Grant, and other special programs
• School programs, such as need-based grants
and scholarships
Applying for Financial Aid
 Know what financial aid forms are required:
• FAFSA (Free Application for Federal Student Aid) –
federal aid, PA State Grant, college aid, and private
scholarships
• State Grant Form (SGF) required for first year students
(and may be requested for subsequent years)
• CSS Profile required by some postsecondary schools
and scholarship organizations
• Institutional financial aid forms
Know Your Deadlines!!!!!
Know all of your state and school/college deadlines and file the
FAFSA by the earliest deadline.
 Federal Deadline - end of the award year - for 2013-2014, this
would be June 30, 2014
 PA State Grant deadlines –
• May 1, 2013 - First Time and Renewal Applicants that plan to
enroll in a degree program or a college transferable program at
a junior college or other college or university
• August 1, 2013 - First Time applicants that plan to enroll in a
community college; a business, trade, or technical school; a
hospital school of nursing; or a 2-year program that is not
transferable to another institution
Know School Deadlines
Free Application for Federal Student Aid
(FAFSA)
Complete the FAFSA as soon as possible after
January 1 of the year for which the student is
seeking financial aid.
Two ways to complete the FAFSA:
• Online at www.fafsa.gov (highly recommended)
- safe, secure, fast, skip logic, built-in edits
- complete FAFSA on the Web Worksheet
- print the confirmation page when finished
• Paper FAFSA – call 1-800-433-3243
www.FAFSA.GOV
 New FAFSA Entry
 Renewal Application Entry
 FAFSA Corrections
 Providing Signatures
 Continuing a Saved FAFSA
 Viewing Transaction History
Apply for PA State Grant from FAFSA
Confirmation Page
Who is independent?
• 24 or older on Jan 1st of award year (January 1,
1990)
• Veteran (includes active duty personnel)
• Working on graduate level degree
• Emancipated minor in legal guardianship
• Orphan, in foster care, or ward of the court at
anytime when student was age 13 or older
• Have legal dependents other than spouse
• Student deemed homeless by proper authority
Special Circumstances
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Recent death or disability
Reduced income
Loss of employment
Recent Separation or Divorce
• Contact the school and ask for a special
consideration AND Contact State Grant Division
at PHEAA
Financial Aid
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Financial Aid
Forms are Filed
– What’s Next?
Determining need-based eligibility
• Student submits FAFSA
• Family undergoes need analysis
• Expected Family Contribution (EFC) is determined based on:
- Parent income and assets
- Student income and assets
- Family size
- Number of children in college
- Age of the older parent
This is NOT the amount you will pay each year!
How will you cover the cost??
• In most cases, you WILL have to pay for educational expenses.
This is your ACTUAL family contribution, or AFC. You have three
ways to cover your share:
•
Yesterday’s money
SAVINGS – have you been able to save?
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Today’s money
INCOME – is anything left at the end of the month?
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Tomorrow’s money
LOANS – how much can you afford to borrow?
What happens next?
• Student Aid Report or Acknowledgment sent to student
(review and make necessary corrections)
• Information is sent to PHEAA. Student must complete State
Grant Form (SGF). Can link to this directly from the FAFSA.
• Account Access (PHEAA) - create an account at
www.pheaa.org to view PA State Grant
• Information is sent to schools/colleges. Send to all schools
being considered.
Calculating Financial Need
Schools/colleges receive financial aid information and
calculate financial need
School cost……………………. $26,000
EFC…………………………….. - 3,000
Financial need………………… $23,000
Financial Aid Office (FAO) “packages” student based on
financial need and available funding (varies from school
to school).
Financial aid award letter sent to student.
Packaging Example
Cost
EFC
Need
$25,000
$ 3,000
$22,000
$45,000
$ 3,000
$42,000
$ 6,000
$ 5,500
$
0
$11,500
$ 8,000
$ 7,000
$ 2,000
$17,000
$18,000
$ 8,000
$ 3,000
$29,000
Gap (Cost – Aid) $ 3,500
$ 8,000
$16,000
$ 14,000
$24,000
Free Money
Loans
Work
Total Aid
$15,000
$ 3,000
$12,000
Actual Cont.
(Cost – Free Money)
$ 9,000
Financial Aid Award Letter
• Is official notification from school about financial aid,
terms, and conditions.
• Lists the type and amount of each award to be
received
• Describes what must be done to accept or reject any
award.
• Discloses students rights, responsibilities, and
academic requirements.
How to Cover
the Actual Family Contribution
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Savings – Family
529 Plans – Family
Scholarships – Various Sources
Grants – Federal and State
Tuition Payment Plans – School
Federal Student Loans – Department of
Education
• Institutional Loans – School
• Private Education Loans – Bank
• Home Equity Loans – Bank
Financial 101
Tips and
Strategies
Reduce the Need for Financial Aid
• Graduate on Time
 4 year for Bachelors Degree / 2 year Associates Degree
• Research and find the right school and major
 Minimize transfer and change of major
• Earn college credits while in high school through AP courses,
Vo-Tech, and dual enrollment
• Consider options for cutting costs (commute, take summer
classes, buy used books, make smart meal plan choices
• 2 + 2 Strategy (2 years at a Community College then transfer
credits to a 4 year school)
• 3 + 2 (Master’s Degree)
Beware of the 5 Year Plan!
Things like double majors, study abroad, internships, and
athletics can enhance the educational experience and improve
marketability. But it comes at a price:
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Total cost just increased by 25%.
The fifth year likely costs 20% more than the 1st year did.
Loss of institutional funds if they only allow for four years.
Loss of PA State Grant if all four years have been received.
Reduction in student borrowing capacity if maximum loans
received in the first four years (only $4,000 left).
• Talk it over and plan ahead!
Reduce the Impact of Borrowing
• Don’t borrow more than you need
• Maximize Federal loans vs. Private loans
• Don’t borrow more to get your degree than
you plan on making the very first year after
graduation
• Utilize institutional or private payment
plans – monthly payments, little or no
interest
Be a Smart Consumer
Do your Research…
• What is the Net Price that you will pay? Use the Net
Price Calculator at schools student is interested in
attending to get an estimate of your “net price” to attend.
Net Price calculator available on each school’s website.
• What is the graduation rate?
• What is the average debt of graduates?
• What is the repayment rate and default rate of the
school’s borrowers?
• What is the employment outcome for recent graduates?
Financial Aid
101
Final Thoughts
Presenter
Contact
Information
Carol Handlan
PHEAA
[email protected]
717-514-9038